2018 (11) TMI 1798 - AT - Income Tax

Damages for remittance of Pension Fund Trust paid - damages paid by the assessee for the delayed payments of contribution is not compensatory but damages in the nature of penalty - HELD THAT - Furnishing a copy of interest rate declared by Pension Fund accumulation since 1952 to 2014, the AR submitted that since the AO has already decided the nature of this payment i.e., the damages paid by it in assessment year 2011-12, is compensatory in nature, this appeal may be allowed. We heard the rival submissions and find merit in the submissions made by the ld. AR, supra, and hence, do not find any merit in the submission of the Revenue. The appeal grounds of the Revenue are dismissed. MACT provisions to the loss - HELD THAT - It is clear that the facts and circumstances associated with this is issue neither brought out by the AO nor by the CIT(A). In the facts and circumstances, we deem it fit to remit this issue back to the AO for a fresh examination. The assessee shall lay relevant materials in support of its contention before the AO and comply with the requirements of the AO in accordance with law. AO is free to conduct appropriate enquiry as deemed fit, but he shall furnish adequate opportunity to the assesssee on the material etc to be used against it and decide the matter in accordance with law.

Summary

Issues:
1. Disallowance of damages for remittance of Pension Fund Trust
2. Addition of MACT provisions to the loss

Issue 1: Disallowance of damages for remittance of Pension Fund Trust
The Revenue filed appeals against the orders of the Commissioner of Income Tax (Appeals) regarding the disallowance of damages for remittance of Pension Fund Trust paid by the assessee. The Assessing Officer disallowed the damages, holding them as penalties rather than compensatory payments. The assessee contended that the damages were compensatory in nature, citing a Supreme Court decision. The CIT(A) ruled in favor of the assessee, directing the AO to treat the expenditure as compensatory and allow the deduction under section 37(1). The Revenue appealed against this decision, arguing that the damages were not proven to be compensatory. The Tribunal upheld the CIT(A)'s decision, stating that the damages were compensatory, as evidenced by the AO's decision in a previous assessment year.

Issue 2: Addition of MACT provisions to the loss
In the assessment for the year 2007-08, the AO added MACT provisions to the loss, which the assessee challenged before the CIT(A). The CIT(A) allowed the appeal, finding fault with the AO's assessment order for lack of detailed discussion on the MACT provisions. The CIT(A) concluded that the AO's order was insufficient and accepted the assessee's argument, allowing all grounds of appeal. The Revenue appealed this decision, claiming that the CIT(A) failed to consider various provisions made by the assessee. The Tribunal reviewed the CIT(A)'s order and found it lacking in discussion on the issue. Consequently, the Tribunal remitted the issue back to the AO for a fresh examination, directing the assessee to provide relevant materials for consideration. The Tribunal dismissed the Revenue's appeal in one case and treated the appeal in the other case as allowed for statistical purposes.

In conclusion, the Tribunal upheld the CIT(A)'s decision regarding the disallowance of damages for remittance of Pension Fund Trust, considering them compensatory. However, the Tribunal remitted the issue of MACT provisions back to the AO for further examination due to inadequacies in the assessment order and CIT(A)'s decision.